An economic theory, revisited

Paul Krugman grapples with the baffling fact that austerity continues its grip on policy when it has been proven ineffective time and again:

Part of the answer surely lies in the widespread desire to see economics as a morality play, to make it a tale of excess and its consequences. We lived beyond our means, the story goes, and now we’re paying the inevitable price. Economists can explain ad nauseam that this is wrong, that the reason we have mass unemployment isn’t that we spent too much in the past but that we’re spending too little now, and that this problem can and should be solved. No matter; many people have a visceral sense that we sinned and must seek redemption through suffering — and neither economic argument nor the observation that the people now suffering aren’t at all the same people who sinned during the bubble years makes much of a dent.

But it’s not just a matter of emotion versus logic. You can’t understand the influence of austerity doctrine without talking about class and inequality.

What, after all, do people want from economic policy? The answer, it turns out, is that it depends on which people you ask — a point documented in a recent research paper by the political scientists Benjamin Page, Larry Bartels and Jason Seawright. The paper compares the policy preferences of ordinary Americans with those of the very wealthy, and the results are eye-opening.

Thus, the average American is somewhat worried about budget deficits, which is no surprise given the constant barrage of deficit scare stories in the news media, but the wealthy, by a large majority, regard deficits as the most important problem we face. And how should the budget deficit be brought down? The wealthy favor cutting federal spending on health care and Social Security — that is, “entitlements” — while the public at large actually wants to see spending on those programs rise.

You get the idea: The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor. What the top 1 percent wants becomes what economic science says we must do.

He goes on to make the point that in the long run, we would all, rich and poor alike, be better off if we abandoned austerity, though the rich have done far better under this regimen than the rest of us.

So once again, I tender what I believe to be the correct explanation for this phenomenon.

President Kennedy once observed that a rising tide lifts all boats. The point was that in a good economy we’re all better off, be our boat a yacht or a kayak. But his analogy was somewhat flawed, for in a rising economy, one in which we peons get decent social security, health care and wage increases that reflect our productivity, our boats, relative to those of the 1%, might rise just a bit higher relative to theirs. Sure, they’d still be able to look down from the decks of their yachts into the hold of our canoes, but they’d be holding their heads an an angle slightly less oblique, and this they cannot abide. Why is this? Again, I must quote a line masterfully delivered by Robert Vaughn, playing an arch-villain capitalist in Superman III: “It is not enough that [they] succeed, everyone else must fail.”

So, while the super-rich might succeed just a tad more if we ditched austerity, it would not be enough to make up for the fact that so many fewer would fail. They see before them the prospect of a brighter tomorrow, a world governed by and for the oligarchs, dressed up in a facade of faux democracy to keep the proles ground down and quiescent. They’re not about to give that up for a few extra bucks that none of them need.

This was written by JCW. Posted on Friday, April 26, 2013, at 6:19 pm. Filed under Economics. Bookmark the permalink. Follow comments here with the RSS feed. Comments are closed, but you can leave a trackback.